Microsoft still favours Toshiba in a battle over formats of next generation DVDs despite growing Hollywood support for Sony's rival technology, the US software giant's chief executive said.

Microsoft aims to make its next-generation "Windows Vista" operating system compatible with Toshiba's HD DVD format after the software is released within the next 18 months.

Microsoft chief executive Steve Ballmer said the initial version of the software might not work with HD DVD drives but the company was aiming for compatibility "at the earliest and appropriate time."

"We have chosen to support HD DVD for a number of reasons, including the way and the effectiveness with which we can see it integrating with the PC.

"We think it has some real advantages and that's why we have been working very actively with Toshiba and other members of the DVD forum in order to promote this concept."

Ballmer noted there was support among the motion picture giants for both HD DVD and Sony's Blu-ray technology, which are going head-to-head in a replay of the VHS-Betamax video cassette war of the late 1970s.

Last month, Toshiba's rival Sony won a crucial boost in the duel over DVD formats as Warner Bros. became the latest Hollywood studio to announce support for Blu-ray as well as HD DVD.

Warner Bros., as with Paramount Home Entertainment, decided to hedge its bets by officially backing both sides.

Among other studios, Walt Disney, Sony Pictures Entertainment and Twentieth Century Fox are members of the Blu-ray association while Universal Pictures has given its support to HD DVD.

At the same time, Microsoft and Sony are arch-rivals in the market for home games consoles but Ballmer expressed optimism about prospects for the software behemoth's new Xbox 360, which it plans to release in Japan on December 10.

"We expect to continue to increase momentum and unit volumes compared to Xbox One," he said.

"We engineered the hardware, so on top of the market success ... I also think we have the business model which puts us in the position to make good profits, which obviously we did not do with the first generation of Xbox One."